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State AG probes Apple, Amazon over e-Book prices

Connecticut Attorney General Richard Blumenthal said Monday he has launched investigations of Apple and Amazon for e-book pricing deals struck with publishers that appear to block competitors from offering better deals.

In letters sent to the companies – which sell the iPad and Kindle, respectively – Blumenthal, a Democrat running for the U.S. Senate, said their contracts with publishers such as Macmillan, Simon & Schuster, Hachette, HarperCollins and Penguin ensure that they receive the best prices for e-books. That blocks competitors from offering better deals to consumers, he said.

The investigation comes amid a competition to draw consumers in an increasingly crowded e-book market. Amazon said recently that its sales on its Kindle reader outpaced its sales of hardcover books. Apple and Amazon did not immediately respond to e-mails requesting comment.

Publishers are struggling to find ways to make money from books, magazines and newspapers as more content shifts to digital formats. They have also been at odds with content distributors over who gets rights to subscriber information and price of content.
According to Folio, Apple appeared to block Sports Illustrated from running basic subscription services for its iPad application, which would deprive parent Time Inc. of information to tailor advertising to users and give that coveted data to Apple, which runs its own mobile advertising network iAds. And the New York Times reported in March that Amazon was threatening to stop selling online books from publishers such as Macmillan amid pricing disagreements.

Blumenthal said his office surveyed prices listed by Apple, Amazon, Borders and Barnes & Noble for the electronic versions of works on the New York Times bestseller list and found that the four sellers' prices were identical.

“These agreements among publishers, Amazon and Apple appear to have already resulted in uniform prices for many of the most popular e-books -- potentially depriving consumers of competitive prices,” Blumenthal said.

He asked Apple and Amazon to meet with him to explain their pricing practices.

It's the publishers that set the prices. Just like the record and movie industries, have lost track of the difference between volume and individual unit prices. A lower individual price will sell more and with electronic distribution, little or no additional cost.